Corporate Social Responsibility: An Implementation Guide for Business

Part 1: An overview of corporate social responsibility

Introduction
Responsible business is good business

We are committed to creating economic value, but we are not indifferent to how we do it. ...
Progressive businesses are gaining competitive advantage by responding to societal
signals. ... We prosper by helping society to prosper.
Idar Kreutzer, CEO Storebrand, 2005

There is growing recognition of the significant effect the activities of the private sector have
on employees, customers, communities, the environment, competitors, business partners,
investors, shareholders, governments and others. It is also becoming increasingly clear that
firms can contribute to their own wealth and to overall societal wealth by considering the
effect they have on the world at large when making decisions.

Business opinion polls and corporate behavior both show increased levels of understanding of
the link between responsible business and good business. Also, investors and financial
markets are beginning to see that CSR activities that integrate broader societal concerns into
business strategy and performance are evidence of good management. In addition to building
trust with the community and giving firms an edge in attracting good customers and
employees, acting responsibly towards workers and others in society can help build value for
firms and their shareholders.

There is no way to avoid paying serious attention to corporate citizenship: the costs of
failing are simply too high. ... There are countless win-win opportunities waiting to be
discovered: every activity in a firms value chain overlaps in some way with social factors
everything from how you buy or procure to how you do your researchyet very few
companies have thought about this. The goal is to leverage your companys unique
capabilities in supporting social causes, and improve your competitive context at the same
time. The job of todays leaders is to stop being defensive and start thinking systematically
about corporate responsibility.
Michael Porter, Professor, Harvard Business School, at the April 2005.
Business and Society Conference on Corporate Citizenship, sponsored by the University of
Torontos Rotman School of Management.

It must be recognized up front that CSR still creates a degree of confusion and controversy. Is
the promotion and implementation of socially and environmentally preferable corporate
conduct a function of business or government? Is the implementation of CSR practices a cost
or a value-enhancer? Is it just public relations? In part, the problem stems from definitional
issues, and a perception in some quarters that CSR is more about philanthropy, rather than
doing business and responding to shareholder interests. The central thesis of this guide is
that CSR is an integral part of the new business model.

Properly understood, CSR should be seen as the way that firmsworking with those most
affected by their decisions (often called stakeholders)can develop innovative and
economically viable products, processes and services within core business processes,
resulting in improved environmental protection and social conditions.

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This approach manifests itself in many forms, including high profile statements made by
many corporate CEOs. Launching General Electrics Ecomagination vision of a cleaner,
healthier world, Chief Executive Jeffrey Immelt underlined the companys commitment to
find the big answers for the big questionsclimate change, health, waterand to develop
solutions, working in partnership with governments and civil society; 3 in other words,
aligning core business strategy with the changing social and environmental context.

We believe that the leading global companies of 2020 will be those that provide goods and
services and reach new customers in ways that address the worlds major challenges
including poverty, climate change, resource depletion, globalization, and demographic
shifts.
Niall Fitzgerald, former CEO & Chairman, Unilever

Businesses are an integral part of the communities in which they operate. Good executives
know that their long-term success is based on continued good relations with a wide range of
individuals, groups and institutions. Smart firms know that business cant succeed in societies
that are failingwhether this is due to social or environmental challenges, or governance
problems. Moreover, the general public has high expectations of the private sector in terms of
responsible behavior. Consumers expect goods and services to reflect socially and
environmentally responsible business behavior at competitive prices. Shareholders also are
searching for enhanced financial performance that integrates social and environmental
considerations, both in terms of risk and opportunities.

Governments, too, are becoming aware of the national competitive advantages to be won
from a responsible business sector.4 At the same time, leading industry associations, such as
the World Business Council for Sustainable Development, have also suggested that countries
as well as companies might gain a competitive advantage from corporate social
responsibility. In much of the developing world, governments and business understand that
their respective competitive positions, and access to capital, increasingly depends on being
seen to respect the highest global standards.5

Even companies which may have a good reputation can risk losing their hard-earned name
when they fail to put systematic approaches in place to ensure continued positive
performance. The effect of a tarnished reputation often extends far beyond that one firm:
entire sectors and, indeed, nations can suffer. Hardly a month goes by without some example
of a major corporation suffering a reduced market position as a result of questionable
behavior, with many others subsequently finding themselves to be a part of the collateral
damage. These firms frequently expend considerable time and money attempting to regain
their reputation, with mixed results.

So what can be done to increase the likelihood that firms can enhance their good reputation,
and continue to demonstrate positive business, social and environmental performance?

On a practical level CSR approaches need to be constructed by adapting best practices,

existing initiatives and analyses to local contexts and situations. This guide aims to provide
objective guidance on these matters within a larger sustainable development framework in a
balanced manner.6

Part 1
2
An overview of corporate social responsibility
What is corporate social responsibility?

Social responsibility (is the) responsibility of an organization for the impacts of its decisions
and activities on society and the environment through transparent and ethical behavior that
is consistent with sustainable development and the welfare of society; takes into account the
expectations of stakeholders; is in compliance with applicable law and consistent with
international norms of behavior; and is integrated throughout the organization.
Working definition, ISO 26000 Working Group on Social Responsibility, Sydney, February
2007

Corporate social responsibility (CSR) is also known by a number of other names. These
include corporate responsibility, corporate accountability, corporate ethics, corporate
citizenship or stewardship, responsible entrepreneurship, and triple bottom line, to name
just a few. As CSR issues become increasingly integrated into modern business practices,
there is a trend towards referring to it as responsible competitiveness or corporate
sustainability.

A key point to note is that CSR is an evolving concept that currently does not have a
universally accepted definition. Generally, CSR is understood to be the way firms integrate
social, environmental and economic concerns into their values, culture, decision making,
strategy and operations in a transparent and accountable manner and thereby establish better
practices within the firm, create wealth and improve society. As issues of sustainable
development become more important, the question of how the business sector addresses them
is also becoming an element of CSR.

The World Business Council for Sustainable Development has described CSR as the business
contribution to sustainable economic development. Building on a base of compliance with
legislation and regulations, CSR typically includes beyond law commitments and activities
pertaining to:
corporate governance and ethics;
health and safety;
environmental stewardship;
human rights (including core labor rights);
sustainable development;
conditions of work (including safety and health, hours of work, wages);
industrial relations;
community involvement, development and investment;
involvement of and respect for diverse cultures and disadvantaged peoples;
corporate philanthropy and employee volunteering;
customer satisfaction and adherence to principles of fair competition;
anti-bribery and anti-corruption measures;
accountability, transparency and performance reporting; and
supplier relations, for both domestic and international supply chains.

Generally, CSR is understood to be the way firms integrate social, environmental and
economic concerns into their values, culture, decision making, strategy and operations in a
transparent and accountable manner, and thereby establish better practices within the firm,
create wealth and improve society.7

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These elements of CSR are frequently interconnected and interdependent, and apply to firms
wherever they operate in the world.

It is also important to bear in mind that there are two separate drivers for CSR. One relates to
public policy. Because the impacts of the business sector are so large, and with a potential to
be either positive or negative, it is natural that governments and wider society take a close
interest in what business does. This means that the expectations on businesses are rising;
governments will be looking for ways to increase the positive contribution of business. The
second driver is the business driver. Here, CSR considerations can be seen as both costs (e.g.,
of introducing new approaches) or benefits (e.g., of improving brand value, or introducing
products that meet sustainability demands). The remainder of this guide addresses the second
of these drivers.

Since businesses play a pivotal role both in job and wealth creation in society and in the
efficient use of natural capital, CSR is a central management concern. It positions companies
to both proactively manage risks and take advantage of opportunities, especially with respect
to their corporate reputation and the broad engagement of stakeholders. The latter can include
shareholders, employees,8 customers, communities, suppliers, governments, non-
governmental organizations, international organizations and others affected by a companys
activities (see Part 3, which is exclusively devoted to stakeholder engagement).

Above all, CSR is about sensitivity to contextboth societal and environmentaland related
performance. It is about moving beyond declared intentions to effective and observable
actions and measurable societal impacts. Performance reporting is all part of transparent,
accountableand, hence, crediblecorporate behavior. There is considerable potential for
problems if stakeholders perceive that a firm is engaging in a public relations exercise and
cannot demonstrate concrete actions that lead to real social and environmental benefits.

Corporate responsibility is the basis on which business renegotiates and aligns the
boundaries of its accountability.
Responsible Competitiveness: Reshaping Global Markets Though Responsible Business
Practices, AccountAbility, December 2005

CSR can involve a wide range of stakeholders

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Source:http://strategis.ic.gc.ca/epic/site/csrrse.nsf/vwapj/stakeholder.txt/
$FILE/stakeholder.txt

A corporations stakeholders can include: shareholders, non-governmental organizations,

business partners, lenders, insurers, communities, regulators, intergovernmental bodies,
consumers, employees and investors.

Why has CSR become important?

In the flat world, with lengthy global supply chains, the balance of power between global
companies and the individual communities in which they operate is tilting more and more in
favor of the companies. As such these companies are going to command more power, not
only to create value but also to transmit values, than any other institution on the planet.9
Thomas L. Friedman, The World is Flat, 2005.

Many factors and influences have led to increasing attention being devoted to the role of
companies and CSR. These include:
Sustainable development: United Nations (UN) studies and many others have underlined
the fact that humankind is using natural resources at a faster rate than they are being replaced.
If this continues, future generations will not have the resources they need for their
development. In this sense, much of current development is unsustainableit cant be
continued for both practical and moral reasons. Related issues include the need for greater
attention to poverty alleviation and respect for human rights. CSR is an entry point for
understanding sustainable development issues and responding to them in a firms business
strategy.
Globalization: With its attendant focus on cross-border trade, multinational enterprises and
global supply chainseconomic globalization is increasingly raising CSR concerns related to
human resource management practices, environmental protection, and health and safety,
among other things. CSR can play a vital role in detecting how business impacts labour
conditions, local communities and economies, and what steps can be taken to ensure business
helps to maintain and build the public good. This can be especially important for export-
oriented firms in emerging economies.
Governance: Governments and intergovernmental bodies, such as the UN, the
Organization for Economic Co-operation and Development (OECD) and the International
Labor Organization (ILO) have developed various compacts, declarations, guidelines,
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principles and other instruments that outline norms for what they consider to be acceptable
business conduct. CSR instruments often reflect internationally-agreed goals and laws
regarding human rights, the environment and anti-corruption.
Corporate sector impact: The sheer size and number of corporations, and their potential to
impact political, social and environmental systems relative to governments and civil society,
raise questions about influence and accountability. Even small and medium size enterprises
(SMEs), which collectively represent the largest single employer, have a significant impact.
Companies are global ambassadors of change and values. How they behave is becoming a
matter of increasing interest and importance (see box below).
Communications: Advances in communications technology, such as the Internet and
mobile phones, are making it easier to track and discuss corporate activities. Internally, this
can facilitate management, reporting and change. Externally, NGOs, the media and others can
quickly assess and profile business practices they view as either problematic or exemplary. In
the CSR context, modern communications technology offers opportunities to improve
dialogue and partnerships.
Finance: Consumers and investors are showing increasing interest in supporting
responsible business practices and are demanding more information on how companies are
addressing risks and opportunities related to social and environmental issues. A sound CSR
approach can help build share value, lower the cost of capital, and ensure better
responsiveness to markets.
Ethics: A number of serious and high-profile breaches of corporate ethics resulting in
damage to employees, shareholders, communities or the environmentas well as share price
have contributed to elevated public mistrust of corporations. A CSR approach can help
improve corporate governance, transparency, accountability and ethical standards (see
matrix below).
Consistency and Community: Citizens in many countries are making it clear that
corporations should meet the same high standards of social and environmental care, no matter
where they operate. In the CSR context, firms can help build a sense of community and
shared approach to common problems.
Leadership: At the same time, there is increasing awareness of the limits of government
legislative and regulatory initiatives to effectively capture all the issues that CSR address.
CSR can offer the flexibility and incentive for firms to act in advance of regulations, or in
areas where regulations seem unlikely.
Business Tool: Businesses are recognizing that adopting an effective approach to CSR can
reduce the risk of business disruptions, open up new opportunities, drive innovation, enhance
brand and company reputation and even improve efficiency.

Companies should do more, multi-nation surveys suggest

A 2004 GlobeScan CSR survey of more than 23,000 individuals in 21 countries suggests that
the public expects more from the corporate sector:
In industrialized countries, trust in domestic (49 per cent) and global companies (38 per
cent) was lower than that of non-governmental organizations (68 per cent), the United
Nations (65 per cent), national governments (52 per cent) and labor unions (50 per cent).
While more recent surveys, including the 2007 Edelman Trust Barometer (see footnote 9)
show a rise in public trust in business, trust in CEOs remains low.

For their part, CEOs see the importance of sustainability and CSR. According to the 10th
PricewaterhouseCoopers Annual Global CEO Survey, 81 per cent of CEOs surveyed
(between September and December 2006) agreed or agreed strongly with the statement: My
companys development programme focuses increasingly on equipping leaders to take a role
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in creating a sustainable business environment. A similar percentage of respondents in a
U.S. Chamber of Commerce survey conducted in late 2005 agreed that companies need to
make corporate citizenship a priority.10

What is the business case for CSR?

The business case for CSR will differ from firm to firm, depending on a number of factors.
These include the firms size, products, activities, location, suppliers, leadership and
reputation (i.e., of the sector in which the firm operates). Another factor is the approach a
firm takes to CSR, which can vary from being strategic and incremental on certain issues to
becoming a mission-oriented CSR leader.

The business case for CSR also revolves around the fact that firms that fail to engage parties
affected by their activities can jeopardize their ability to create wealth for themselves and
society, and increase the risk of legal or other responses. Taking into account the interests and
contributions of those one affects is the basis for ethical behavior and sound governance.
CSR is essentially a strategic approach for firms to take to anticipate and address issues
associated with their interactions with others and, through those interactions, succeed in their
business endeavors.

There is growing consensus about the connection between CSR and business success. The
World Business Council for Sustainable Development (WBCSD) has noted that a coherent
CSR strategy based on integrity, sound values and a long-term approach offers clear business
benefits to companies and contributes to the well-being of society.

Investor recognition of CSR in the marketplace

The recent progress of the socially responsible investment (SRI) movement at the domestic
and international levels provides evidence that the marketplace is developing both social and
environmental information and criteria to supplement the traditional financial criteria used to
make investment decisions. Market indexes and professional firms now provide information
to mutual funds, private equity funds, venture capital funds, commercial banks and other
financial market investors about a wide range of corporate characteristics, including
governance, human resource management, health and safety, environmental protection and
community development. Some examples of SRI indexes are the Dow Jones Sustainability
index, FTSE4GOOD 100 Index, Jantzi Social Index Canada, Innovest, Calvert CALVIN
Social Index and KLD Domini 400 Index. In the U.S., nearly one dollar in every ten under
professional management is involved in SRI.11

The indexes, mutual funds and banks involved in SRI state how they define CSR and
sustainability. Initially, SRI was about screening out potentially undesirable sectors (e.g.,
tobacco, gambling). Some associated initiatives have developed to identify and quantify
specific risks. The Carbon Disclosure Project, for example, is an effort by a group of fund
managers and investors to identify the carbon risks (associated with climate change) of
individual firms.12 It is worth noting that SRI has also moved to using positive criteria related
to leadership approaches, planning processes and management practices in areas such as
corporate governance and environment. There are many approaches to presenting the
information.

Increasingly, mainstream fund managers are examining the advantages of assessing a firms
governance, social and environmental record in making investment decisions. Recently, the
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impact of decisions by private equity investors on social and environmental conditions has
also become an issue in the media.13

Potential benefits of implementing a CSR approach

We believe in CSR because it is a proposition aligned with our values, but also because it
makes business sense. Our commercial partners expect from us sound environmental and
social practices. We get and understand the message and are actively promoting CSR among
associates. We want to be recognised as a responsible industry, adding value to our
products.
Ronald Bown, President, Chilean Fruit Exporters Association (at GRI G3 launch, October
2006)

Key potential benefits for firms implementing CSR include:

Better anticipation and management of an ever-expanding spectrum of risk. Effectively
managing governance, legal, social, environmental, economic and other risks in an
increasingly complex market environment, with greater oversight and stakeholder scrutiny of
corporate activities, can improve the security of supply and overall market stability.
Considering the interests of parties concerned about a firms impact is one way of better
anticipating and managing risk.
Improved reputation management. Organizations that perform well with regard to CSR
can build their reputation, while those that perform poorly can damage brand and company
value when exposed. Reputation, or brand equity, is founded on values such as trust,
credibility, reliability, quality and consistency. Even for firms that do not have direct retail
exposure through brands, their reputation for addressing CSR issues as a supply chain partner
both good and badcan be crucial commercially.
Enhanced ability to recruit, develop and retain staff. This can be the direct result of
pride in the companys products and practices, or of introducing improved human resources
practices, such as family-friendly policies. It can also be the indirect result of programs and
activities that improve employee morale and loyalty. Employees are not only front-line
sources of ideas for improved performance, but are champions of a company for which they
are proud to work.
Improved innovation, competitiveness and market positioning. CSR is as much about
seizing opportunity as avoiding risk. Drawing feedback from diverse stakeholders can be a
rich source of ideas for new products, processes and markets, resulting in competitive
advantages. For example, a firm may become certified to environmental and social standards
so it can become a supplier to particular retailers. The history of good business has always
been one of being alert to trends, innovation, and responding to markets. Increasingly,
mainstream advertising features the environmental or social benefits of products (e.g., hybrid
cars, unleaded petrol,14 ethically produced coffee, wind turbines, etc.).
Enhanced operational efficiencies and cost savings. These flow in particular from
improved efficiencies identified through a systematic approach to management that includes
continuous improvement. For example, assessing the environmental and energy aspects of an
operation can reveal opportunities for turning waste streams into revenue streams (wood
chips into particle board, for example) and for system-wide reductions in energy use, and
costs.
Improved ability to attract and build effective and efficient supply chain relationships.
A firm is vulnerable to the weakest link in its supply chain. Like-minded companies can form
profitable long-term business relationships by improving standards, and thereby reducing
risks. Larger firms can stimulate smaller firms with whom they do business to implement a

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CSR approach. For example, some large apparel retailers require their suppliers to comply
with worker codes and standards.
Enhanced ability to address change. A company with its ear to the ground through
regular stakeholder dialogue is in a better position to anticipate and respond to regulatory,
economic, social and environmental changes that may occur. Increasingly, firms use CSR as a
radar to detect evolving trends in the market.
More robust social license to operate in the community. Improved citizen and
stakeholder understanding of the firm and its objectives and activities translates into
improved stakeholder relations. This, in turn, may evolve into more robust and enduring
public, private and civil society alliances (all of which relate closely to CSR reputation,
discussed above). CSR can help build social capital.
Access to capital. Financial institutions are increasingly incorporating social and
environmental criteria into their assessment of projects. When making decisions about where
to place their money, investors are looking for indicators of effective CSR management. A
business plan incorporating a good CSR approach is often seen as a proxy for good
management.
Improved relations with regulators. In a number of jurisdictions, governments have
expedited approval processes for firms that have undertaken social and environmental
activities beyond those required by regulation. In some countries, governments use (or are
considering using) CSR indicators in deciding on procurement or export assistance contracts.
This is being done because governments recognize that without an increase in business sector
engagement, government sustainability goals cannot be reached (see box below).
A catalyst for responsible consumption. Changing unsustainable patterns of consumption
is widely seen as an important driver to achieving sustainable development. Companies have
a key role to play in facilitating sustainable consumption patterns and lifestyles through the
goods and services they provide and the way they provide them. Responsible consumerism
is not exclusively about changing consumer preferences. It is also about what goods are
supplied in the marketplace, their relationship to consumer rights and sustainability issues,
and how regulatory authorities mediate the relationship between producers and consumers.

According to the 10th PricewaterhouseCoopers Annual Global CEO Survey, 81 per cent of
CEOs surveyed (between September and December 2006) agreed or agreed strongly with the
following statement: My companys development programme focuses increasingly on
equipping leaders to take a role in creating a sustainable business environment. 15 A similar
percentage of respondents in a U.S. Chamber of Commerce survey conducted in late 2005
agreed that companies need to make corporate citizenship a priority.16

Real firms are reporting real benefits from CSR

There is general evidence that firms are beginning to benefit from their CSR activities. This
can be seen from such things as positive media profile (e.g., winning awards, receiving
attention), surveys of employee, community and customer satisfaction, and from the success
of CSR-driven business lines. Here are some examples.
The Indian TATA group is engaged in a wide variety of activities directed at helping
community development. The company Web site lists examples of the positive media this has
generated. http://tata.com/0_our_commitment/community_initiatives/index.html.
There are now high-profile lists of the most responsible companies. The Innovest firm 100
Most Sustainable Companies in the World list, for example, has been released annually at
the World Economic Forum since 2005. http://www.innovestgroup.com/

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 The 2007 Edelman Trust Barometer (see footnote 9, above), suggested that there had been
an improvement in public perception of business. This may have been due to the increased
attention businesses are giving to CSR issues.
Standard Chartered Banks Seeing is Believing campaign to help cataract sufferers has
resulted in a number of awards for the company. See:
http://www.seeingisbelieving.org.uk/fundraise/news.asp.

Financial market opinion

There is a growing body of evidence that companies which manage environmental, social
and governance risks most effectively tend to deliver better risk-adjusted financial
performance than their industry peers.
Jean Frijns, Chief Investment Officer, ABP, 2004

The consideration of material social and environmental issues should be a part of every
financial analysts normal work. Not only does this make sense from an investment risk
perspective; institutional clients are increasingly asking for better integration in fund
management.
Thomas Albrecht, Director of Research, Credit Suisse Asset Management, 200417

Firms typically put a CSR approach in place for more than just economic reasons. In many
cases, it is also due to moral principles, belief that it is the right thing to do and concern for
the welfare of present and future generations that spur a firm to consider its responsibilities.

Finally, it is also important to acknowledge that while positive or neutral correlations between
social and environmental responsibility and superior financial performance have generally
been supported by the evidence, conclusive causal links have not. Many studies are being
undertaken, with varying conclusions.18 Overall, one of the keys to ensuring that the effects of
adopting CSR are positive for business is through appropriate planning and monitoring.

Study shows benefits of CSR

Based on a two-year study, the World Business Council for SustainableDevelopment has
drawn several conclusions about the benefits of CSR to companies
A coherent CSR strategy, based on integrity, sound values and a long term approach, offers
clear business benefits to companies and helps a firm make a positive contribution to society;
A CSR strategy provides businesses with the opportunity to show their human face;
Such a strategy requires engagement in open dialogue and constructive partnerships with
governments at various levels, intergovernmental organizations, non-governmental
organizations, other elements of civil society and, in particular, local communities;
When implementing a CSR strategy, companies should recognize and respect local and
cultural differences, while maintaining high and consistent global standards and policies; and
Being responsive to local differences means taking specific initiatives.

The full report is available at http://www.wbcsd.org.

The (U.K.) Government believes that responsible business underpins many of the much
larger challenges that we are tackling today. It is essential in driving sustainable
development, tackling climate change and in many cases preventing and resolving conflict.
Only if governments, businesses and civil society groups working together, can we
successfully tackle these key global issues.

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Dr. Kim Howells, British Foreign Office Minister, speaking at the launch of the Web site for
the U.K. Network of the UN Global Compact, 6 December 2006

What is the relationship between CSR and the law?

There is a close relationship between CSR and the law. The main instrument governments use
to address a firms social, environmental and economic impacts is the law. Many countries
have a wide range of laws, whether at the national, state or local levels of government,
relating to consumers, workers, health and safety, human rights and environmental protection,
bribery and corruption, corporate governance and taxation. A firms CSR approach should
begin by ensuring full compliance with those laws already in place. No matter how good a
CSR policy may be, failure to observe the law will undermine other good efforts. Looking
ahead, the CSR activities of firms can be seen as a proactive method of addressing potentially
problematic conduct before it attracts legal attention.

SustainAbilitys view on the changing landscape of liability

The issue of past, current and potential liabilities has exercised boards of large companies
for decades. This report makes the case that the landscape of liabilityand therefore the risks
for companies and to shareholder valueis changing and changing rapidly. It explores the
evidence, maps the changes and attempts to guide business with the help of studies to
navigate new and uncharted territory. The studies examine and draw conclusions in relation
to climate change, human rights, obesity and legacy issues.19

A key feature of the emerging CSR debate is the difference between a compliance
mentality (i.e., only doing those things that are required) and a value driven mentality (i.e.,
using a CSR approach to innovate and seek new markets). Some commentators argue that a
compliance-based approach does not help business, because it tends not to drive innovation
and the out of the box thinking they see as necessary in the rapidly changing business
world. That said, a number of specific legal aspects are worth mentioning.
Performance reporting and the law. In many jurisdictions there are laws in place
requiring firms in particular sectors to publicly disclose certain of their practices and
activities. The U.K. Companies Act 2006, for example, requires publicly-listed companies to
report on a number of specific issues where they are necessary to understanding the
companys business. These include environmental matters (including the impact of the
companys business on the environment), the companys employees, social and community
issues, and risks through the company supply chains. Similar provisions also exist in France
and across the EU.
Corporate governance and disclosure. Social and environmental issues are increasingly
being seen as integral components of the corporate governance agenda. 20 In many countries
firms issuing securities are required to publicly disclose their corporate governance practices
and comply with local guidelines on the subject. A 2005 report by the international law firm
Freshfields, Bruckhaus and Deringer21 concluded that under the current legal systems of
many countries, directors might be in breach of their fiduciary duties if they did not take into
account environmental, social and governance issues.
Bribery. CSR also stresses that firms should adopt responsible practices wherever they
operate. National laws making it illegal to bribe foreign officials to obtain or retain business
on the subject are often based on the 1997 OECD Convention on Combating Bribery of
Foreign Public Officials in International Business Transactions,22 and the 2003 UN
Convention Against Corruption.23
Requirements under different jurisdictions. It is important to be aware of the varying
legal requirements of different countries. In the U.K., for example, legislation requires
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pension fund trustees to publish a comment in their investment statements on the extent to
which their investment policies address social, ethical and environmental issues. As noted
above, in European countries laws require companies to report on their social and
environmental performance. In the U.S., a number of firms have been sued under the Alien
Tort Claims Act (e.g., Doe v. Unocal), which raises the possibility that corporate liability
could be established through transnational civil litigation. The U.S. has also significantly
revised its corporate governance legislation in recent years, in particular, passing the
Sarbanes-Oxley Act in 2002 which establishes stricter standards for all U.S. public company
boards, management and public accounting firms. At the United Nations, a Special
Representative on Business and Human Rights to the Secretary-General was appointed in
July 2005. The Special Representative is expected to identify standards of corporate
responsibility and accountability, enhance understanding and recognition of these standards,
and issue recommendations on future United Nations work regarding business and human
rights issues.

Mention should also be made in this context of the many business codes of conduct that exist.
These codes, often developed by a specific industry sector, are usually voluntary and not
legally-binding. Nonetheless, they can be used in a legally-binding manner in a contractual
context (e.g., in a supply chain). Here, various legal questions may arise, including in relation
to whether national, regional or international standards take precedence.

3 Further details can be found on the General Electric Web site, http://ge.ecomagination.com.
4 See Responsible Competitiveness: Reshaping global markets though responsible business
practices, AccountAbility, December 2005, quoted above.
5 See Developing Value: The business case for sustainability in emerging markets, 2002, a
report by IFC, SustainAbility and Ethos.
7 In its latest working definition of the scope of social responsibility, the ISO 26000
Working Group on Social Responsibility identifies organizational governance, environment,
human rights, labor practices, fair operating practices, consumer issues and community
involvement as core issues. Resolution 3, Sydney, 2 February 2007.
8 In cases where employees have elected representatives, these should also be included in the
consultation process. For the purposes of this guide, any reference to employees includes
worker representative where these exist, and workers throughout the supply chain.

9 This conclusion appears to be supported by public opinion. The 2007 Edelman Trust
Barometer found that a majority of respondents in North America (71 per cent) and Asia (72
per cent) thought that global business plays a role that no other institution can in addressing
major social and environmental challenges. Fifty-seven per cent in the European Union and
63 per cent in Latin America also believe this to be true.
10 http://www.pwc.com; and http://www.uschamber. com/publications/reports/ 05stateofcc.
htm.
11 See 2005 Report on Socially Responsible Investing Trends in the United States, Social
Investment Forum, 2006.

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12 http://www.cdproject.net.
13 For further information on the performance of SRI funds, see
http://www.sristudies.org/html/sixteen_studies.html.
14 See, for example, What Assures Consumers, AccountAbililty and National Council,
2006.
15
http://www.pwc.com/extweb/home.nsf/docid/2AE969AC42DD721A8525725E007D7CF2.
16 http://www.uschamber.com/publications/reports/05stateofcc.htm.
17 Who Cares Wins: Connecting financial markets to a changing world, Global Compact,
2004.
18 Since its inception in 1990, the Domini 400 Social Index has had an average return of
12.17 per cent, compared with the S&P 500s 11.49 per cent. A Wharton School study
however shows SRI funds underperforming a broader universe of funds. Research is
continuing on this issue, including through initiatives such as the Enhanced Analytics
Initiative http://www.enhancedanalytics.com.
19 http://www.sustainability.com/insight/liability-article.asp?id=180.
20 The 2004 OECD Principles of Corporate Governance provide an authoritative source of
reference,
http://www.oecd.org/document/49/0,2340,en_2649_34813_31530865_1_1_1_1,00.html.
21 http://www.unepfi.org/events/2005/roundtable/press.
22 http://www.oecd.org/document/21/0,2340,en_2649_34859_2017813_1_1_1_1,00.html.
23 http://www.unodc.org/unodc/crime_convention_corruption.html.

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